Tax cuts debated under urgency

The Government brought a bill to Parliament tonight to enact its tax cuts programme and it provoked the first serious conflict with Labour since the election.

The Taxation (Urgent Measures and Annual Rates) Bill legislates for the tax cuts announced in October, the changes to KiwiSaver and the repeal of the research and development tax credit.

Finance Minister Bill English said it was a crucial bill introduced when the world was in economic turmoil and New Zealand's economic outlook was more uncertain that it had been for several decades.

"This is part of National's plan to get New Zealand through a recession and to lift our long-term economic prospects," he said.

"In combination with our plan to bring forward infrastructure (spending), we believe we can protect New Zealanders from the sharpest edge of recession, but we can't avoid it."

The tax cuts will deliver $18 a week extra for a worker on the average wage when the first tranche kicks in next April.

Incorporating Labour's October 1 tax cuts, the same worker would be $47 a week better off by April 12, 2011, when the whole programme is in force.

There is a tax rebate of $10 a week for workers earning between $24,000 and $50,000 who do not receive anything from the Working for Families programme.

Labour's finance spokesman, David Cunliffe, said it was badly designed because it delivered benefits for upper and middle-income earners while low income families were the losers.

"And it is undermining KiwiSaver at a time when the world faces an unprecedented credit squeeze," he said.

"While targeting productivity and supposedly innovation, they gut the research and development tax credit that has almost universal support from people who actually design things, build things and export things."

Mr Cunliffe said there was no logical link between the measures in the bill and the Government's self-described priorities.

"It will not contribute to growth and productivity. It is the wrong tool at the wrong time for the wrong problem," he said.

"This is Robin Hood in reverse, taking from the poor to give to Bill English."

ACT's new MP Sir Roger Douglas said it was "a small step in the right direction" in marked contrast to anything Labour had done over the past nine years.

Sir Roger said core government expenditure increased by $18.2 billion above inflation during that time.

"This increased expenditure cost every New Zealander, on average, $1000 a month or $12,000 a year," he said.

"And Labour spent that extra tax. . .on dubious programmes and failed social experiments that have not benefited New Zealand households by anywhere near the $1000 a month they took off them."

The bill passed its first reading on a vote of 68 to 50 and debate had just started on its second reading when Parliament adjourned.

It will continue through its stages under urgency tomorrow.